American expatriates may face double-taxation due to existing laws and despite treaty

Citizens of the United States living overseas of working age are required to file a U.S. Internal Revenue Service tax form every year, and if they have incomes, may have to pay U.S. income taxes, on top of any levies they also face in their place of residence.

Michael Wardell, 44, who has lived in Japan on four separate occasions for a combined 15 years, is trying to eliminate that requirement. It is one of the promises in his election campaign for the Republican nomination for the seventh congressional district in Missouri. The election will be held Aug. 3 and if he wins, he will run for a representative seat from the state in the Nov. 2 congressional poll.

“The first and foremost (reason to eliminate the income tax requirement for U.S. citizens abroad) is, although tax treaties are in place that address the potential for double-taxation, the citizen is getting nothing in return,” Wardell, a marine veteran who now lives in Missouri, said in an e-mail interview.

The tax treaty between Japan and the U.S., for example, stipulates that each country must try to limit double-taxation, but does not say the two countries must eliminate it, according to the Finance Ministry’s Tax Bureau.

Americans living overseas are obliged to report their income to the IRS, and those who meet certain qualifications, whose gross income, or income before paying taxes to their host countries, exceeds a certain level may have to pay federal tax.

“It’s taxation without representation,” Wardell said. People who do not register to vote in federal elections with U.S. embassies in their host countries “have little to no voice inside Congress or the White House and furthermore do not enjoy the benefits and freedoms of America but have to pay for them.”

Wardell is aware some people say there are services embassies supply to Americans living abroad and thus they should be taxed, but he argues that there are fees charged for these services, which include applications to obtain passports and marriage registrations.

His promise will certainly be welcomed by Americans living in Japan and other countries who face a long list of procedures in order to file their IRS tax forms. Wardell said that filing for Japanese taxes is easier.

“Unless you live near (central Tokyo’s) Toranomon Station and the American Embassy or consulates, getting your tax paperwork filed, questions answered, or solving a dispute, is a nightmare. Time off of work, the travel, the record-keeping is oppressive,” he said.

Wardell’s background makes him an excellent spokesman for the voices of about 1 million nongovernment-employed Americans living overseas to be heard in U.S. politics.

He, his father, and also his grandfather, all served in the U.S. military and lived overseas, including in Japan, for a long time. His grandfather was also a member of Gen. Douglas MacArthur’s staff.

Wardell, who has moved more than 15 times in his life due to his parents’ and his own relocations, was born at the U.S. Navy Yokosuka Base in Kanagawa Prefecture, as his parents both served in the navy. He left Japan for the first time when he was 5 years old.

He joined the U.S. Marines in 1984 and spent the majority of his military career in Africa and Japan. On Oct. 1, 2001, while stationed in Japan and after 17 years of service, Wardell was medically discharged due to a wound received during a central African civil war. At the time, he held a top security clearance.

Wardell remained in Japan and, as a civilian, was appointed CEO of Achieve Group Inc., a Tokyo-based interpreting and translating company and an operator of language schools.

He also served as secretary of Republicans Abroad in Tokyo in 2001 and 2002. He moved back to the U.S. in 2004, where he is now a restaurateur.

As a longtime resident in Japan, Wardell said he had difficulty dealing with the cultural difference of American independence versus the Japanese collective.

“These two opposites will drive most Americans crazy,” he said. “An example would be: In most American businesses, what the boss says, the team does, no matter what, and if you don’t like it, either deal with it or leave the company. In Japan, everyone is part of the decision, which, although takes longer to come to a conclusion, once done, the team works at lightning speed.

“The best way I found to overcome this issue was to try and understand why those around you are thinking the way they do. You may not like it, but it will give you a greater understanding of the dynamics of the team of group you are working in.”

Difficulties in living in Japan as an American also stem from the fact that many Americans grow up in rural areas and are not accustomed to actually living in large metropolitan areas, as the majority of those who move to Japan live in big cities like Tokyo and Osaka, he said.

He recommends they move to smaller communities to experience “the beauty of Japan and Japanese people.”

Language may be one of the biggest barriers, but foreigners can challenge themselves by going to places where there are very few or even no foreigners living. They can do so even if they live in Tokyo, he said.

“I lived in Roppongi half of my time in Tokyo, but I still was able to find the small town feeling. You just need to look for it,” he said. “Learning Japanese will sometimes make you feel like crying your eyes out at the frustration of trying to communicate, but the magic that happens in both your ability to retain the language and becoming part of the community is an experience that you will take with you for the rest of your life.”